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October 12, 2005

TABOR in Kansas

Kansas is one of more than a dozen states in which anti-tax organizations are pushing to enact stringent limits on the allowable growth of state/local taxes and spending from year to year. In Kansas, the man in the black hat is a group called "Americans for Prosperity," (and who doesn't want prosperity?). AFP wants to pass a constitutional amendment limiting growth in revenues to the growth of population and inflation.

The editorial board of the Topeka Capital-Journal gets it just right in their October 7 editorial on this topic:

The first problem with the concept is what year will be used as the standard where the taxation level was just right?

In other words, when you allow revenues only to grow with population and inflation, you're pretty much asserting that the current levels of spending are just right and are not likely to ever change.

"2005" is pretty clearly not the answer to the Capital-Journal's question, since state courts have repeatedly told lawmakers in recent years that the state is not meeting its constitutional requirement to provide an adequate education for Kansas kids. And one of the big topics in the 2006 legislative session will be how the state's gonna find new money to satisfy the court's mandate.

It's hard to imagine that there will ever be a time and place when a government knows that it is adequately funding current needs and will never face new spending needs that would force overall public spending higher-- but if such a place exists, it sure isn't Kansas. Hats off to the Capital-Journal for recognizing this basic truth.

3 Comments:

Boy the arguments that people make when they don't have any facts to fight with. I'm going to assume by your post that you disagree with the principles of TABOR as well, not just that the year 2005 is a bad year to get started.

Colorado has a TABOR amendment most closely associated with the proposal in Kansas, but there are some key differences. One thing that will not be different is the great success that will follow when TABOR has been passed.

You are absolutely correct in that the government will face new spending needs, note the term needs, not wants. Yet you know the great thing about TABOR? It's absolutely wonderful, you see if new needs arise, then the people of the state get to vote and say if they want to fund this new "need." It's absolutely amazing.

Now if you would like to argue the economic effects of controlling government spending we can do that to, and we could start by looking at Colorado. Since enacted in Colorado, TABOR has allowed over $3billion to be returned to the taxpayers. Since 1992 Colorado ranks 3rd in population growth and personal income growth. Kansas ranks 36th and 41st respectively.

Before TABOR from 1980 to 1992 Colorado ranked 34th in income growth while Kansas was 47th.

Before TABOR Colorado and Kansas had similar economies, afterwards Colorado has shot upward. Now, throw the ideological banter to the side, and argue with the facts.

The most fundamental is whether fiscal policy choices should ever be made through direct democracy-- and if so, what type of choices should be made that way. I think one of the most useful functions of a representative democracy is putting technical decisions in the hands of informed representatives. Most people simply don't have time to learn about the complexities of state/local tax policy. Even if they wanted to, the quality of information that filters thru the media is unreliable. Witness the difficulty in getting straight answers to the most basic questions about federal fiscal policy (for example, how large our budget deficit will be for the rest of the decade).

Given these difficulties, fiscal policy decisions should, in general, be in the hands of elected officials, not least because they've generally got professional staff to give them the straight dope on the impact of the decisions they might make. In Kansas, there's a fantastic legislative group geared toward doing just that: see http://skyways.lib.ks.us/kansas/ksleg/KLRD/klrd.html .

A related point is whether the rules by which taxes are changed should discriminate between tax hikes and tax cuts. Pretty much every TABOR rule I've ever seen puts more stringent limits on tax hikes than on tax cuts. Public policy decisions should be made on a level playing field, and the standard TABOR setup creates a bias toward tax cuts. It takes ideological blinders to make this seem like a good idea-- I'd say there is no such thing as taxes being too low, or too high, independent of the level of services a state wants to provide. TABOR rules, by contrast, basically assert that whatever the circumstances, taxes are already too high. If you believe that, fine-- but it's pretty indefensible as a public policy principle.

The second point worth a bit more discussion is whether comparing economic growth in Colorado and Kansas over the past decade tells us anything at all about the impact of TABOR. Inflation-adjusted (to $2004 levels) per capita personal income grew pretty fast in Colorado from 1992 to 2004. Looking at other states that are in the top ten by this measure, it grew at about the same rate in Minnesota over this period, and actually grew a little bit faster in Massachusetts and the District of Columbia. None of these other states have a TABOR provision-- and none of them would generally be considered low-tax havens. Does this prove that high-tax states grow faster? Hell no. In fact, it proves about as much as your data proves-- which is to say, nothing at all.

Without knowing exactly where the data you cite came from and precisely what it means (for example, what is "income growth"-- nominal or real, per capita or total?), I can't verify your claims. (Can you point me to your source for this info?) But I can tell you that you can't just pick and choose two data points like that and say with a straight face that TABOR caused Colorado's recent growth.

Welcome back. The people I've spoken to in colorado say that TABOR has made the operation of government extremely difficult particularly since Medicaid increases means that every other budget decreases. You can't go to the people and say that we have to raise taxes to pay for poor people - it doesn't work. That's why presumably we elect people to make the decisions for us.

There's a discussion we are not having out there that's hidden by all of the "efficient" government arguments: do we as a society need government? If the answer is yes and I think that that is the answer then we need to pay for it.

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The subjects of every state ought to contribute toward the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state - Adam Smith, An Inquiry Into The Nature and Causes of the Wealth of Nations, 1776